U.S. House Says Staff Absolutely Immune in Answer to SEC

July 5 (Bloomberg) -- The U.S. House Ways and Means
Committee and a top staff member say the panel and its employees
are “absolutely immune” from having to comply with subpoenas
from a federal regulator in an insider-trading probe.

The committee yesterday responded to U.S. District Court
Judge Paul Gardephe’s order to explain why it hadn’t complied
with the U.S. Securities and Exchange Commission’s requests for
documents, phone records and testimony of aide Brian Sutter for
more than a year. Gardephe gave the House until yesterday to
answer.

Kerry W. Kircher, the top lawyer for the House, said the
SEC’s request should be dismissed because the information it
seeks concerns legislative activities protected by the
Constitution, which can’t be reviewed by federal judges. If
Gardephe won’t dismiss the SEC’s case, it should be transferred
to federal court in Washington, Kircher said.

“What the SEC has done is embark on a remarkable fishing
expedition for congressional records -- core legislative
records,” Kircher said in a court filing. “The SEC invites the
federal judiciary to enforce those administrative subpoenas as
against the Legislative Branch of the federal government. This
court should decline that invitation.”

The so-called speech and debate clause in the Constitution
protects members of Congress and staff from any outside inquiry
into legislative business.

Testing Limits

The SEC sought the subpoenas in an investigation testing
the limits of federal insider-trading laws on whether the
committee or staff members illegally passed on non-public
information about a change in U.S. health-care policy. In
seeking compliance with the subpoena demand, the SEC cited a
2012 law that requires public officials to keep confidential any
non-public information about government matters that could move
stock prices.

Sutter ’s connection to the investigation is “tangential”
Kircher said, and would also interfere with his work because his
schedule is “heavily, and nearly permanently, booked.”

The regulator is investigating a spike in trading of
health-insurance companies, including Humana Inc., ahead of a
government announcement last year that increased, rather than
cut, payments to health insurers. The SEC says it has evidence
that Sutter “may have been a source” used by a lobbyist at
Greenberg Traurig LLP. The lobbyist disclosed the health policy
changes to an analyst at Height Securities LLC who sent out an
alert ahead of the government announcement, according to the
SEC.

Trading Spike

Within five minutes of the Height Securities’ report,
prices and trading volumes of health care insurers spiked, with
Humana rising 7 percent, according to the SEC.

The SEC sought the information to determine who Sutter
spoke with and if he had contact with Greenberg Traurig.

Greenberg Traurig is cooperating with the inquiry and will
continue to do so, Jill Perry, a spokeswoman for the law firm,
said in an e-mailed statement.

John Nester, a spokesman for the SEC, declined to comment
on the House’s filing.

The case is SEC v. The Committee on Ways and Means of The
U.S. House of Representatives and Brian Sutter. 14-mc-00193.
U.S. District Court Southern District of New York (Manhattan).